The advent of on-line commerce has created a need for non-traditional payment and funding vehicles to enable consumers to reliably transfer value to merchants in exchange for goods or services. Although a variety of non-standard payment vehicles have recently become available, to use these non-traditional payment services causes a variety of disadvantages.
Historically, merchants and consumers transacting business had done so together in a single physical location. Accordingly, consumers were able to easily transfer value to merchants in the form of tangible objects such as coins or currency. In time, various institutions developed alternative services for facilitating transfers of value between consumers and merchants. Such services eliminated the necessity to transfer a tangible object and offered the alternative of merely providing information sufficient to enable the merchant to acquire the necessary value from a reliable third party, such as a financial institution. Eventually, it became common for consumers to present bank drafts, plastic cards (e.g., credit cards, debit cards, or the like), or other physical objects containing the information to merchants. The consumer's possession of the card coupled with some identifying indicia on the card or another form of identification such as a driver's license served to reduce fraud. In effect, consumers facilitated transactions by merely presenting sufficient information to identify their financial institution and a particular account at that institution from which a designated amount of value could be transferred.
Through widespread use of such cards and bank drafts, a payment process evolved to facilitate transactions. In this traditional payment process, a consumer would present a financial instrument to a merchant, which would send the financial instrument, or the information therefrom, to an acquirer. The acquirer would pay the merchant and forward the instrument, or information, to the instrument's issuer, who would bill the consumer. Finally, the acquirer and the issuer would settle according to the various discounts and fees due each.
Eventually, an extensive payment infrastructure was developed comprising communication links between merchants, financial institutions, and consumers. This payment infrastructure is adapted to facilitating the traditional payment process quickly, reliably, and efficiently. Further, while the infrastructure has evolved and been refined, financial institutions participating in the infrastructure have also developed many additional varied financial instruments specifically tailored to be used in conjunction with the payment infrastructure.
In addition, many institutions now make available additional sources of value that may be used in conjunction with coin, currency, and cash to facilitate transactions. For example, consumers may redeem certificates for discounts, rebates, rewards, and/or loyalty points. Often, such certificates may be combined with another source of value to reduce the out-of-pocket cost to the consumer. In most cases, however, to use a certificate requires the consumer to provide a document or other tangible object to the merchant that describes the terms of the offer and how it is funded or may be redeemed by the merchant.
With the advent of on-line commerce, the common lack of physical proximity between the consumer and the merchant has rendered transfers of cash and other tangible objects nearly obsolete. Accordingly, demand has increased significantly for alternative payment and funding vehicles to enable consumers to reliably transfer value to providers of goods or services.
In response to this need, a variety of non-standard payment vehicles have recently become available to facilitate on-line transactions. For example, several private cash vendors such as Flooz, Beenz, InternetCash, and the like have recently introduced their services to on-line consumers and merchants. Unfortunately, however, to use these non-traditional payment services requires merchants and consumers to adapt to varied and non-traditional payment infrastructures. In addition, most of the available non-standard online payment products have required merchants to adopt new authorization and settlement processes and have failed to adequately take advantage of the existing payment infrastructures used for the more traditional forms of payment, such as credit, debit, charge cards and cash. As a result, these non-traditional payment services have had minimal success or have failed to gain significant acceptance in the marketplace, and new entrants may be destined for failure.
The lack of universal merchant acceptance of the varied instruments now held by consumers limits and unnecessarily complicates the payment choices available to consumers. For example, some merchants may accept cards from only one preferred issuer, and if a consumer does not hold that instrument, the consumer must either avoid that merchant or acquire an instrument that the merchant will accept. In many cases, these choices are unacceptable and may produce a disadvantageous situation. For example, a consumer may be forced to forego their use of an advantageous loyalty program or preferential interest rate.
The advent of on-line commerce has also helped to enable merchants as well as payment service providers to collect and analyze extensive data regarding the purchasing and payment characteristics of consumers and the sales and collection characteristics of merchants. While these data collection capabilities may be desirable and may offer certain advantages to some participants, to others they present an infringement upon the participants' expectation of privacy. Some consumers simply do not want merchants or payment service providers to be able to collect information regarding their purchasing and/or payment characteristics or even the identity of the participants to their transactions. Similarly, some merchants simply do not want payment vehicle service providers, especially those closely affiliated with the merchants' creditors, to be able to collect data regarding the merchants' sales and/or collection histories.
In partial response to these problems, a variety of systems currently exist for inserting an account between a merchant and a payment vehicle service provider (i.e., U.S. Pat. Nos. 6,014,646; 6,032,136; 5,826,243; 5,963,924; 6,189,787 and 6,223,168). Unfortunately, however, these systems do not always allow consumers to use their desired payment vehicle service provider, or value source. Moreover, none of these systems substantially protects the privacy of the participants while providing a complete payment service, from authentication of the participants to authorization of the transaction to settlement of the payment.
Further, attempts to simply adapt traditional card-based purchase transactions leave many problems unsolved. For example, the use of traditional card payment systems may present difficulties whenever a consumer desires to use more than one financial instrument at a time to pay for a particular purchase. In such situations, the consumer will receive separate statements, each describing only a portion of the activity related to that purchase. As a result, the consumer must manually consolidate and integrate the information from the various statements to view the total records of the transactions reflected therein.
Accordingly, it would be advantageous to have a payment vehicle whereby merchants could effectively accept payments funded by one or more non-standard sources of value without changing their standardized and widely accepted payment infrastructures. It would also be advantageous to have a payment vehicle that could be used to provide value for purchases at any network merchant using any desired source of value. It would further be advantageous to have a system for providing or facilitating a complete payment service, from authentication of the participants to authorization of the transaction to settlement of the payment, while simultaneously protecting the privacy of the participants.